BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER

Poverty, a market failure not curable by technology fixes

by Chakravarthi Raghavan

Geneva, 10 July 2001 - “The belief that there is a technological silver bullet that can ‘solve’ illiteracy, ill-health or economic failure reflects scant understanding of real poverty”, says Mr. Mark Malloch Brown, UNDP Administrator in the opening para of his foreword to the Human Development Report 2001 (HDR-2001), whose theme is ‘making new technologies work for human development.’

The Report makes a big pitch for two of the ‘new technologies’ and their benefits for developing countries - bio-technology and information technologies.

Running through the report is the view - or is it faith - that technology and technological innovation is a progressive contribution to humankind that technological breakthroughs were “largely responsible” for the 20thcentury’s “unprecedented gains in advancing human development and eradicating poverty,” that markets are a powerful engine of technological progress but not for diffusing it to eradicate poverty, and that these problems are due to some market failures that can be cured through some global mitigatory policies (including differential pricing for drugs).

But there is another view, by no means the view of a minuscular minority, of the economic history of the late 19th and the 20th century that points in another direction - that much of technological innovation and economic growth, industrialization, income growths and distribution, was due not to the market or liberal economics, but an active state role that ‘used’ the market, and intervened to ensure technology diffusion and equitable income distribution that helped sustained growth and development.

In this view there are both market and technology ‘failures’, and these lead to increasing imbalances, within and across countries, potential marginalisation, growing inequalities and poverty.

The HDR-2001 oscillates between these two positions, such as over intellectual property rights and the WTO’s TRIPS agreement and the role of IPRs in rewarding innovation and its role in industrialization and economic growth and development, and with some (relatively minor in fact) changes: implementing TRIPS in such a way as to enable developing countries to use ‘safeguards’ (non-voluntary licensing of patents under Art. 31 of the TRIPS agreement) to secure access to “technologies of overriding national importance”, and for carrying out the commitments under TRIPS to promote technology transfer.

No doubt the HDR presents the other view too - - for example, Ha-Joon Chang’s view that today’s industrial leaders have reached this position (of technological advance and of industrialization and economic growth) only by ‘pirating’ the patent, copyright and trade-marks of others abroad. The Chang view is relegated to a box (on p 103) on the lessons from the history of intellectual property rights, summarising a background paper written for the UNDP by Prof. Ha-Joon Chang, ‘Intellectual Property Rights and Economic Development - Historical Lessons and Emerging Issues’.

Chang’s paper (earlier versions of it have been presented by him at some meetings to elicit comments and views from other experts) clearly brought out that today’s industrial leaders reached this position only by breaching patent, trade-mark, copyright and other such ‘rights’, and that they were able to do this because there was no constraining global trade regime that could be enforced on today’s technology followers (the developing countries) by the leaders (US, EU and Japan) to prevent emerging competition to the dominant position of their major corporations in the ‘globalized’ market.

The developing countries today are being prevented from technological advances and leap-frogging that the industrialized countries of today did, through the WTO and its agreements, pre-eminent among which are the TRIPS agreement and the threat (and use) of trade sanctions to enforce corporate property rights.

There is now not only quite an amount of literature on this past, but a currently growing view, including among the scientific community in the United States, public health and development experts everywhere that the way the patent system is worked and used, not for rewarding ‘innovation’ but protecting corporate property rights, has created ‘patent pollution’ (as Argentine expert Carlos Correa and others call it), with patent offices not clearly scrutinising whether any innovation is involved, but opting often in favour of the applicant for the patent (as against public interest) when by very minor improvements, which clearly are not innovations, new patents are sought and are registered, merely to produce rentier incomes for ‘property’ and ‘investments’ - to the point where innovation itself is now endangered.

Apart from Chang’s view, there is considerable other literature, referenced in the HD’s bibliography itself, that technological innovations and breakthroughs have come about as a result of public funding and publicly directed research, some for civilian purposes, others for military purposes that had either spin-offs for civil uses or were recycled.

Moving between these two views, the HDR-2001 opts in effect for the promises and hypes about genetic engineering and information technology which may have their uses, but are not panaceas.

In fact this pitch for GE in agriculture, and for the information technology has clouded the HDR’s tradition and history of providing some hard facts and critiques on development issues.

The current patent system is often credited for the ‘explosion’ in innovations and industrial advances. The HDR- 2001 (page 103) cites the increase in number of patents claimed in the US over the past 15 years - from 77,000 in 1985 to 169,000 in 1999; and the number of single international applications received and registered by the WIPO from 7,000 in 1985 to 74,000 in 1999.

“Much of this increase reflects a boom in innovative activity, but some reflects less benign change,” HDR concedes, and points to the very broad claims and loose interpretation of the requirements for a patent - novelty, inventive step and capable of industrial applications - and the misguided view of patent offices that where there are doubts, they should give the benefit of doubt to the patent applicant and register the patent, rather than deny it for lack of novelty, invention or industrial application.

The transnational pharmaceutical industry claims that the patent system has enabled it to produce drugs and medicines for diseases, and that the patent system enables it to recompense itself for the very high costs incurred in research and development of drugs.

However, there is some evidence that the very high cost allegedly incurred by the industry to ‘invent’ drugs and other therapeutic products is over-bloated by including the marketing and other costs in promoting the new drugs, often involving small additions (that do not really change or improve the efficacy of the older varieties, where patents have expired and cheaper generic versions are available), and persuading the doctors and the medical profession to prescribe these.

The attempt to present GMOs and GMO-ed agriculture as a must to solve ‘hunger’ in the developing world is equally misconceived - when so many studies have brought out that it is lack of income and growing inequalities of the ‘market’ as practised that is keeping millions in the South hungry.

The ‘Green Revolution’ no doubt produced the wheat surpluses in South Asia, but it also brought problems in tis wake, including salinisation of the soil, and the high inputs needed, that are beyond the reach of the small subsistence farmers of South Asia (and China too).

To ignore these, and solutions to these lie in the realm of political economy, and present new genetically engineered varieties is highly misleading. The promises of genetic engineering in this area are at the moment mere promises - and the studies about increased productivity and production are certainly not conclusive.

A scientific mind and approach demands an open mind, that does not swallow corporate hypes, nor accept the argument that a product is safe, until it has been proved to be harmful. This is an inacceptable argument, whether for rich industrialized societies or for the poorest.

In accepting the hype of bio-tech and genetically-engineered crops, and the ‘international corporate philanthropy’, the HDR has cited the case of vitamin-A enhanced rice that could help reduce global malnutrition, and has cited the ‘philanthropy’ of the many patent holders giving poor farmers access to this variety without claiming patent rights.

As the US-Canada based RAFI (Rural Advancement Foundation International), pointed out in its September/October 2000 RAFI Communique, this particular variety was developed by the public sector researchers and part of the funding came from the Rockfeller Foundation. And ten years’ of research that resulted in this variety was donated in May 2000 to the TNC AstraZeneca (now called Syngenta) because of some 70-100 patents held by various others, and on which licenses would have to be negotiated and obtained, before the ‘golden rice’ could be given to farmers.

The handing over of the patent in fact created an uproar, and the genetic industry hammered by its many failures, saw in this an opportunity to gain some good publicity, and offered to provide it for poor farmers in the developing countries.

But the promotion of this ‘rice’ with beta-carotene to meet vitamin A needs fell flat, when Greenpeace did some simple calculation and showed that to get the necessary daily intake, a child would have to each consume about 3 kilos of this rice every day, and that there were other and cheaper ways available to meet the vitamin A deficiency.

The HDR also suggests that the risks against use of GMOs, and the possibilities of the unintended allergen effects is really an industrial country consumer luxury, and need not weigh with developing countries.

True, in developing countries, the killer diseases, apart from HIV/AIDS now, are tuberculosis and malaria. But to conclude from this that allergens and allergic diseases are not a problem in the developing world would be somewhat misconceived.

The developing world has not gained from the advances of industrialization and other benefits of being rich and prosperous, but there is no urban centre in any developing country where toxic pollutions, allergies and diseases commonly attributed to them (asthma for example) are not widespread.

The HDR underscores the need for regulatory authorities in countries acting in a manner that would inspire public confidence.

This is perhaps equally valid at the international level too.

In both cases, and more so at the international levels of UN system organizations, there is growing lack of public confidence that national and international authorities act in the public interest. Some amount of blame for this rests with the public private partnerships, advocated by the HDR too, and the way they are promoted with great fanfare in the UN’s global compact or WHO’s relationships with pharmaceutical companies.

The patent system, and other intellectual property rights, were created to reward individuals and their inventiveness, and to cure some ‘market failures’, have been distorted and perverted to promote the international property rights of a few corporations. The earlier ‘space’ for governments of countries to balance these private rights and public interest within countries has been upset by the international agreements setting uniform norms, without any method for compensating welfare losses.

As a result, the system itself is now producing market failures, and unless this issue is faced up at international and intergovernmental levels, the present erosion of public confidence in governments, in individual countries or as a collective across the globe, will result in alienation, to nobody’s gain or benefit. – SUNS4933

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

[c] 2001, SUNS - All rights reserved. May not be reproduced, reprinted or posted to any system or service without specific permission from SUNS. This limitation includes incorporation into a database, distribution via Usenet News, bulletin board systems, mailing lists, print media or broadcast. For information about reproduction or multi-user subscriptions please contact: suns@igc.org

 


BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER